Remittances, Monetary Policy Transmission Mechanisms and Economic Performance

Abstract

This study empirically investigated the impact of migrant remittances through monetary policy transmission channels on the economic performance of Nigeria. Previous impact and causality analysis show varied results for migrant remittances on the economic performance of Nigeria. There remains a dearth of studies investigating the impact of remittances on growth after accounting for its transmission effects on monetary instruments. Time series data from 1962 to 2020 from the statistical bulletin of the Central Bank of Nigeria (CBN) and the World Development Indicators were used in the causal research design as well as the correlation analysis, dynamic general method of moment (GMM) and Johansen co-integration technique. The research findings indicate that remittance inflows once interacted with exchange rate exerted a positive and statistically significant impact on the economic performance of Nigeria. Remittance inflow interacted with inflation rate had a positive yet insignificant impact on the economic performance of Nigeria. Monetary policy rate maintained a positive sign with significant impact on the economy of Nigeria; while capital stock investment exerted a negative and insignificant impact on gross domestic product per capita income of Nigeria. The study finds that the interaction of migrant remittances with monetary policy instruments is economically important to the per capita growth in Nigeria in the short and long-run. The study results confirm that the Central Bank of Nigeria (CBN), should continue to facilitate reducing costs of remittances as well as opportunities for diaspora investments, because of the impacts that remittances have on economic performance through other monetary variables.